Estimation of Panel Group Structure Models with Structural Breaks in Group Memberships and Coefficients
61 Pages Posted: 25 Jun 2020 Last revised: 1 Feb 2021
Date Written: January 31, 2021
This paper considers linear panel data models with a grouped pattern of heterogeneity when the latent group membership structure and/or the values of slope coefficients change at a break point. We propose a least squares approach to jointly estimate the break point, group membership structure, and coefficients. The proposed estimators are consistent, and the asymptotic distribution of the coefficient estimators is identical to that under known break point and group structure even when the cross-sectional sample size is much larger than the length of time series. Monte Carlo simulations and an empirical example illustrate the use of the approach and associated inference.
Keywords: Panel data, grouped patterns, structural breaks, group membership change
JEL Classification: C23, C38, C51
Suggested Citation: Suggested Citation